Executed properly, DPM arrangements are nearly risk-free to clients, offer reasonable levels of risk to agencies, are highly scalable -- even in the current economy -- and can potentially be very profitable for clients, publishers and agency alike.
DPM arrangements are widely available, but traditional agencies are reluctant to introduce the practice themselves to their clients for a number of reasons:
- They fear their core fee and mark-up business will be cannabalized
- Their staff is classically trained around the brand rather than leads and conversions
- Agency teams lack customer relationship management (CRM) and workflow consulting disciplines to ensure optimum conversion management
- Lead generation firms have a somewhat tarnished image (can you say Punch the Monkey?)
- Historical media-only focus of performance marketing companies who lack creative and development teams
- Few brand-safe options and lack of transparency in traditional affiliate arrangements
A heyday for DPM
We expect digital performance marketing to be the fastest growing segment of many companies' marketing budgets. There are two key opportunities that make DPM more viable than ever.
First, clients will and are actually expanding their budgets when they know they're tied to performance. Second, new clients who have great products and services but are unable to put capital at risk can now come to market.
These opportunities are not occurring spontaneously. They have emerged as a result of two well-known shifts:
Inventory. Because of a significant reduction in the number of advertisers in the market and reduced budgets for those remaining, some publishers are only selling 30 percent of their inventory, with the rest being sold off for pennies on the dollar to advertising networks. So, reluctantly, media properties are willing to look at alternative revenue models to decrease their dependency on remnant sales.
Accountability. Marketers require accountability more than ever. It is hard to invest in emotional, long-term brand messaging when co-workers are being laid off to reduce costs. "Get me sales now," is heard more often than, "That was really a beautiful spot." The CMO Council reported that nearly 50 percent of all companies plan to restructure and realign their marketing departments to better support sales and drive revenue.
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